If an investor’s mortgage payments rise, they will have to raise their rent to maintain their ICR.īanks require a minimum ICR of 125pc for limited companies and basic-rate taxpayers, and 145pc for higher-rate taxpayers.

Lenders judge affordability for buy-to-let mortgages by comparing gross rental incomes with interest payments via a measure called the interest coverage ratio (ICR). Nearly two thirds of all fixed-rate buy-to-let mortgages will expire by the end of 2024, according to Moody’s, which analysed a sample of 52,000 loans. In this scenario, these landlords would have to raise rents by 27pc in order to be able to refinance, it warned. If landlords who come to the end of a fixed-rate deal in 2023 or 2024 have to pay mortgage rates that are four percentage points higher than currently, more than half will be unable to remortgage unless they raise rents, according to Moody’s, a credit rating agency. Analysts have warned that Britain is on the cusp of a “buy-to-let explosion”. Tenants will be unable to afford higher rents because of the cost-of-living crisis and growing tax burden. Jeremy Hunt, the new Chancellor, will unveil a package of economic policies later this month, but regardless of his interventions, landlords will face significantly higher interest rates when their current loans expire, experts have warned. Landlords will be forced to sell up or inflict huge rent rises on their tenants as soaring mortgage rates risk destroying the buy-to-let model.

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